All transactions consuming resources immediately calculate and post rate variances. These are generated when the standard costs in effect for components or labor at the time of the transaction differ from the resource costs recorded on the cumulative order.

The component costs recorded in a cumulative order are based on the GL standards in effect when the order was created. Labor, burden, and subcontract costs in the cumulative order are based on the routing and work center data in effect when the order was created.

For component material, rate variance is calculated as the difference between the GL standard cost currently in effect and the GL standard cost captured in the cumulative order. This type of variance is rare and typically occurs when the GL standard cost of the component material changes during the life of the cumulative order.

Labor and burden rate variance is calculated in a similar way. When a cumulative order is created, standard labor and burden rates are captured from the routing and work center data in effect. When labor is reported at a cumulative order operation work center, rate variance is calculated as the difference between the actual employee pay rate and the standard rate recorded on the cumulative order.

Subcontract rate variance is the difference between the PO price per unit and the subcontract cost per unit as captured in the cumulative order. This is posted when subcontract items are received from a shipper or PO.

Rate variances are posted only if GL standard costing is in effect for the finished item. They are not posted if GL average costing is in effect.